Urban Bank, Inc., v.

Peña, 659 SCRA 418(2011)

FACTS:
Peña, a lawyer, was formerly a stockholder, director and corporate secretary of Isabel Sugar Company, Inc. (ISCI).
ISCI owned a parcel of land. ISCI leased the land. Without its consent and in violation of the lease contract, the
lessee subleased the land to several tenants, who in turn put up nightclubs inside the compound. Before the
expiration of the lease contract, ISCI informed the lessee and his tenants that the lease would no longer be renewed
because the land will be sold.

ISCI and Urban Bank executed a Contract to Sell, and they agreed that the final installment released by the bank
upon ISCI’s delivery of full and actual possession of the land, free from any tenants.
ISCI then instructed Peña, to act as its agent and handle the eviction of the tenants. The lessee left, but the
unauthorized sub-tenants refused to leave. Peña had the gates of the property closed and he also posted security
guards—services for which he advanced payments. Despite the closure of the gates and the posting of the guards,
the sub-tenants would force open the gates, and proceed to carry on with their businesses.

Peña then filed a complaint with the RTC, which issued a TRO. At the time the complaint was filed, a new title to
the property had already been issued in the name of Urban Bank.
When information reached the judge that the property had already been transferred by ISCI to Urban Bank, the trial
court recalled the TRO and issued a break-open order for the property. Pena immediately contacted ISCI’s president
and told him that because of the break-open order of the RTC, he would be recalling the security guards he had
posted to secure the property. The President asked him to suspend the withdrawal of the posted guards, so that ISCI
could get in touch first with Urban Bank.

Peña also called Urban Bank’s President. The President allegedly assured him that the bank was going to retain his
services, and that the he should not give up possession of the subject land.

Thereafter, Peña, in representation of Urban Bank, filed a separate complaint with the RTC-Makati City, to enjoin
the tenants from entering the Pasay property. Acting on Urban Bank’s preliminary prayer, the RTC-Makati City
issued a TRO.

While the 2nd complaint was pending, Peña made efforts to settle the issue of possession of the property with the
sub-tenants. During the negotiations, he was exposed to several civil and crimal cases and received several threats
against his life. The sub-tenants eventually agreed to stay off the property for a total consideration of PhP1.5M. Peña
advanced the payment for the full and final settlement of their claims against Urban Bank. Peña formally informed
Urban Bank that it could already take possession of the Pasay property. There was however no mention of the
compensation due and owed to him for the services he had rendered. The bank subsequently took actual possession
of the property and installed its own guards at the premises.

Peña thereafter made several attempts to contact Urban Bank, but the bank officers would not take any of his calls.
Peña formally demanded from Urban Bank the payment of the 10% compensation and attorney’s fees allegedly
promised to him during his telephone conversation with Urban Bank’s President for securing and maintaining
peaceful possession of the property.

Urban Bank and individual bank officers and directors argued that it was ISCI, the original owners of the Pasay
property, that had engaged the services of Peña in securing the premises; and, consequently, they could not be held
liable for the expenses Peña had incurred.

ISSUE:
a. Whether or not a contract of agency is established between Urban Bank Inc. and Pena.
b. Whether or not Pena is entitled to payment for the services he rendered as agent of Urban Bank.

Ruling
a. Yes. The subsequent actions of Urban Bank, Inc. resulted in the ratification of Pena’s authority as an agent
acting on its behalf with respect to the Pasay property. By ratification, even an unauthorized act of an agent becomes
an authorized act of the principal. In all these instances, petitioner-respondent bank did not repudiate the actions of
Peña, even if it was fully aware of his representations to third parties on its behalf as owner of the Pasay property. Its
tacit acquiescence to his dealings with respect to the Pasay property and the tenants spoke of its intent to ratify his
actions, as if these were its own. Even assuming arguendo that it issued no written authority, and that the oral
contract was not substantially established, the bank duly ratified his acts as its agent by its acquiescence and
acceptance of the benefits, namely, the peaceful turnover of possession of the property free from sub-tenants.
Even if, however, Peña was constituted as the agent of Urban Bank, it does not necessarily preclude that a third
party would be liable for the payment of the agency fee of Peña. Nor does it preclude the legal fact that Peña while
an agent of Urban Bank, was also an agent of ISCI, and that his agency from the latter never terminated. This is
because the authority given to Peña by both ISCI and Urban Bank was common – to secure the clean possession of
the property so that it may be turned over to Urban Bank. This is an ordinary legal phenomenon – that an agent
would be an agent for the purpose of pursuing a shared goal so that the common objective of a transferor and a new
transferee would be met.
Indeed, the Civil Code expressly acknowledged instances when two or more principals have granted a power of
attorney to an agent for a common transaction. The agency relationship between an agent and two principals may
even be considered extinguished if the object or the purpose of the agency is accomplished. In this case, Peña’s
services as an agent of both ISCI and Urban Bank were engaged for one shared purpose or transaction, which was to
deliver the property free from unauthorized sub-tenants to the new owner – a task that Peña was able to achieve and
is entitled to receive payment for.

b. Yes. Agency is presumed to be for compensation. But because in this case the Court find no evidence that
Urban Bank agreed to pay Peña a specific amount or percentage of amount for his services, the court turn to the
principle against unjust enrichment and on the basis of quantum meruit. Since there was no written agreement with
respect to the compensation due and owed to Atty. Peña under the letter dated 19 December 1994, the Court will
resort to determining the amount based on the well-established rules on quantum meruit.
Agency is presumed to be for compensation. Unless the contrary intent is shown, a person who acts as an agent does
so with the expectation of payment according to the agreement and to the services rendered or results effected. The
Court find that the agency of Peña comprised of services ordinarily performed by a lawyer who is tasked with the
job of ensuring clean possession by the owner of a property. We thus measure what he is entitled to for the legal
services rendered.